• Singapore-listed Nam Cheong, a leading offshore supply vessel (OSV) owner in Malaysia, is also an OSV builder that builds for its own fleet as well as for third parties.
• Aside from reprofiling the fleet with own-built new vessels, selling older vessels is an active capital-allocation decision. • The annual amount is lumpy but vessel sales themselves appear to be a recurring part of Nam Cheong’s earnings.
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Excerpts from DBS Group Research report
Analyst: Ho Pei Hwa
• 1H26 reported PATMI more than doubled y/y to RM162.4mn, driven by maiden shipbuilding contribution and a RM101mn gain on vessel disposals
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| Investment Overview |
A leading OSV player with the youngest fleet in Malaysia. Nam Cheong operates a fleet of 39 mid-sized offshore support vessels (OSVs) with an average age of just over eight years.
This represents a strong competitive advantage, as peer fleets average 13-15 years of age.
The company benefits from strong earnings visibility due to captive demand from Petronas and a strategic shift towards 60%-70% long-term charters.
Nam Cheong is also diversifying its geographic presence and product offerings to tap into the buoyant Middle Eastern and Japanese markets, as well as growing demand for green offshore solutions.
| Shipbuilding revival offers substantial upside |
Potential revival of OSV newbuild orders adds tailwind. The OSV industry faces increasing pressure to rejuvenate its ageing fleet of >15-year-old.
This revived demand for newbuilds will benefit Nam Cheong’s Miri shipyard, potentially generating RM30-200mn in profit.
Nam Cheong has been actively recycling capital and deleveraging balance sheet since 2024, lowering net gearing from 0.6x in end 2024 to 0.1x as of 1H26.
As the group continues to pare down substantial restructured debt, we see potential of dividend resumption in 2027. Every 10% payout would translate to 2 Sct DPS or c.2% yield.
Valuation remains undemanding, TP at SGD1.90. Nam Cheong's valuation remains undemanding at only ~7.5x FY27F PE, at a discount to closest peers such as Singapore-based Marco Polo (13x PE), ASL Marine (9x) and Malaysia-based Lianson (13x).
Our SGD1.90 TP, is based on 13x FY27F PE.
This does not reflect the full potential valuation of its Miri Shipyard, which could add SGD0.13-1.15/share when OSV newbuilds make a comeback.
Reiterate BUY.
Key Risks -- Oil price plunge, charter contract cancellation, idling fleet.
| WHAT’S NEW |
1H26 boosted by vessel sale gains
Nam Cheong’s PATMI rose 104% y/y to RM162.4m in 1H26, driven by the maiden shipbuilding contribution and vessel disposal gains.
Revenue grew 25% y/y to RM348.3m as the shipbuilding segment contributed RM89.7m, its first revenue in six years, while chartering revenue fell 7% y/y to RM258.6m despite utilisation rising to 65% (vs 58% in 1H25) due to vessel sale.
Excluding vessel sale gains, core PATMI for chartering and shipbuilding segments down 20% y/y to RM64mn, hit by higher operating cost in Middle East due to war situation and loss of income from vessel disposals – 2 PSVs, 1 Multipurpose Vessel and 1 AHTS since end 2025.
Group gross margin narrowed 11.4ppt to 39.4%, as higher operating costs for vessels deployed in the Middle East compressed chartering margin to 44.3%, compounded by lower-margin shipbuilding segment (~25%).
Below the COGS line, administrative expenses also rose 60% y/y on higher staff and marketing costs for both businesses.
Balance sheet strength improved markedly, with net gearing falling to 0.10x from 0.27x at FY25 and 0.58x in FY24 on continued debt repayment and stronger cash collections. This bodes well for resumption of dividends.
We estimate that every 10% payout will translate to 2 Scts DPS or c.2% yield.
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DBS: Exceptional gains expected to recur |
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RM m |
FY26F |
FY27F |
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Net profit |
253 |
259 |
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Net profit pre-exceptional |
146 |
185 |
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Exceptional gain/(loss) |
107.0 |
74.4 |
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Source: DBS Research |
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→ See also:NAM CHEONG: Its CEO on Moats and Margin of Safety, Debt and Discipline
